Implied Term of Good Faith in Long-Term Contracts

A recent case has suggested a willingness on the part of the courts to imply a duty of good faith and fair dealing into long-term contractual arrangements.

In Yam Seng PTE Limited v International Trade Corporation Limited [2013] EWHC 111(QB) it was held that there had been an implied term in the distribution agreement between the Claimant (Yam Seng) and the Defendant (International Trade) that the parties would act in good faith and that International Trade had breached such term by both providing misleading information to Yam Seng and threatening not to honour certain rights under the contract.

The Court held that the test of good faith is objective and depends upon whether the conduct in question would be regarded as commercially unacceptable in the particular context by reasonable and honest people; good faith is therefore defined by both the contract and the standards of conduct with which, objectively, the parties would have reasonably assumed compliance was required (without the need to openly state such standards in the contract).

This decision emphasises that parties to a long-term contract cannot necessarily rely on the express terms of the contract as a defence against an allegation that they acted in bad faith.  Moreover, if the contract is of a long-term nature, it is very likely that the parties will be subject to a duty of good faith.

While the list is not exhaustive, in order to avoid the risk of an allegation of bad faith, parties to a contract should always seek to act in a way that is loyal, reliable and honest, to deal with requests for information promptly and accurately and to ensure that all information relevant to the contract that they are aware of is communicated promptly to the other party.

Neil Myerson LLP are the premier corporate commercial solicitors in Cheshire and South Manchester.

MSI Global Alliance

Myerson is the Manchester and Cheshire law firm member for MSI Global Alliance, a top 20 ranked, international association of professional firms.

Learn more...


Myerson act for a wide variety of clients across various sectors.

Learn more...


Read what a selection of our clients have to say about us.

Learn more...

Myerson Promise

We proudly offer our clients a promise which is at the cornerstone of everything we do. We always keep your specific concerns at the forefront of our minds.

Learn more...

Myerson Solicitors LLP
Grosvenor House, 20 Barrington Road, Altrincham, Cheshire, WA14 1HB
Tel: +44(0)161 941 4000
Solicitors Regulation Authority
MSI Global
Law Society
Legal 500